Here’s an interesting insight from the US into the robustness of the business model of Services Corporation International, the clumping, predatory and often bungling funeral chain which begat our very own Dignity Caring Funeral Services. Dignity is not a notably bungling organisation, but the challenges they both face are related:
Because of the lack of industry growth, Service Corporation and its peers have increasingly focused on preneed sales to drive revenue. While paying for a funeral at the time of death is unavoidable, paying in advance is highly discretionary. As a result, the company’s revenue has declined through the recession. More important, proceeds from preneed sales are placed in trusts until the actual funeral services are delivered. Service Corporation carried an investment portfolio of about $3 billion at the end of 2009, with about 40% of that portfolio invested in equities. If this portfolio suffers serious impairments or generates insufficient income, the company could be materially affected.
Dignity is profitable, but it is also leveraged. And, as Andrew Plume pointed out a while back, its figures in many branches are very low. The business pages of UK newspapers customarily talk up Dignity and advise investors that it’s a safe haven for their money. I don’t know that that is how it is seen by any who know the industry. Have any of you funeral directors out there got any money in Dignity?
The single most influential factor is this: the public does not like using a chain funeral director.
Read the whole story here.